Investors Back Patent Trolling

Forbes had a great story on how some patent trollers - small companies that take out broad patents with no intent of actually making anything, only of suing large companies that do - are now getting funded by hedge funds, private equity firms, and other deep-pocketed investors. AS if life wasn't tough enough before. Last year the U.S. Supreme Court limited the ease with which a small company that was obviously looking to make money the new fashioned way, by suing, could threaten a large company with an injunction. That was in the Altitude/eBay case, in which the small company has received a $25 million infringement verdict because eBay's "Buy It Now" feature supposedly infringes on that company's patent. Yet I can remember all the fuss when Amazon got a patent for its one-button shopping feature.

The problem is that even if there is prior art, someone has to dig it out and continue to fight in court while lawyers prepare a Patent Office challenge - a process that, according to what I've heard from IP lawyers, can be extraordinarily long. Not surprising given the backlog in the system and the number of years it can take to get a patent issued. So in the past many companies have folded their tents, deciding that paying off what can, in some cases, seem like extortion is cheaper than a prolonged legal battle.

It seems like there needs to be some reform of the patent system, though it's not clear that anyone has a clear idea of how to do that effectively. The one sure thing is that it's going to take money - a lot of it - to get enough patent inspectors with deep enough experience and training to give a more critical look at many of the patents that seem more and more absurd in their breadth and lack of depth.